American Express 2015 Annual Report Download - page 68

the impact of the $109 million charge in the fourth quarter of 2014 related to the Delta partnership renewal, partially
offset by increased expenses related to new points earned, driven by higher spending volumes.
The prior year increase was primarily due to higher Membership Rewards expense of $263 million, driven by a
$266 million increase related to new points earned, in line with higher spending volumes, and a higher WAC per point
assumption, including the impact of the previously mentioned charge related to the Delta partnership renewal; these
increases were offset by slower average growth in the URR. Cobrand rewards expense increased $211 million in 2014
compared to 2013, primarily driven by higher spending volumes.
The Membership Rewards URR for current program participants was 95 percent (rounded down) at December 31,
2015, compared to 95 percent (rounded up) at December 31, 2014 and 94 percent (rounded down) at December 31,
2013.
Card Member services and other expenses increased $196 million or 24 percent in 2015 compared to 2014 and
increased $55 million or 7 percent in 2014 compared to 2013. The increase in the current year was primarily due to
higher costs related to certain previously renewed cobrand partnership agreements. The increase in the prior year was
primarily driven by increased engagement levels and use of certain Card Member benefits, as well as American
Express-branded airport lounges opened in 2014.
Salaries and employee benefits expenses decreased $1.1 billion or 18 percent in 2015 compared to 2014, and $96
million or 2 percent in 2014 compared to 2013. The decrease in both years was primarily due to the business travel
joint venture transaction (resulting in a lack of comparability between periods). The decrease in the current year was
also driven by restructuring charges in the second and fourth quarters of 2014 and lower compensation costs in 2015
as a result of those initiatives. In 2014, compared to 2013, those restructuring charges partially offset the impact of the
business travel joint venture transaction.
Other expenses increased $704 million or 12 percent in 2015 compared to 2014 and decreased $707 million or 10
percent in 2014 compared to 2013. The increase in the current year reflects the net gain from the 2014 business travel
joint venture transaction, partially offset by the EG charge discussed previously. Refer to Note 2 to the “Consolidated
Financial Statements” for further details on the charge. The decrease in the prior year was primarily driven by the gain
from the business travel joint venture transaction (resulting in a lack of comparability between periods), and a charge
in 2013 related to the rejected merchant litigation settlement. See “Legal Proceedings” for further information on this
merchant litigation.
INCOME TAXES
The effective tax rate was 35.0 percent in 2015 compared to 34.5 percent in 2014 and 32.1 percent in 2013. The
tax rates for 2015, 2014, and 2013 include benefits of $33 million, expenses of $40 million and benefits of $150 million,
respectively, related to the resolution of certain prior years’ items. The tax rate for 2015 also includes the impact of the
nondeductible portion of the goodwill impairment charge in EG. The tax rates for all periods reflect the level of pretax
income in relation to recurring permanent tax benefits and geographic mix of business.
57